The following information is available concerning a potential investment project

Question

The following information is available concerning a potential investment project: Initial investment .............. $167,000 Annual cost savings ............. ? Salvage value in 12 years ....... $4,000 Cost of Capital ................. 9% Life of project ................. 12 years The net present value of this investment was calculated to be $6,274. Calculate the amount of the annual cost savings associated with this investment. Do not use decimals in your answer. You will need to use the time value of money table factors posted in canvas to answer this question. To access these factors, click modules and then scroll to week 7. Click on the link labeled present & future value table factors. No credit will be awarded for this question using a means other than these table factors to answer this question.

Explanation / Answer

Present value of salvage value = 4000*0.3555= 1422 Amount of the annual cost savings = (167000-1422+6274)/7.1607= 23999

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